Bourbon Industry

Sales up 4 percent for Brown-Forman to almost $4.1 billion for the year

Brown-Forman said Tennessee Honey, the sweet extension of its top brand, is now thought to be the 15th-largest brand in the world priced at more than $25 for a 750ml bottle.
Brown-Forman said Tennessee Honey, the sweet extension of its top brand, is now thought to be the 15th-largest brand in the world priced at more than $25 for a 750ml bottle.

Brown-Forman finished fiscal 2015 strong, with almost $4.1 billion in sales, a 4 percent increase over last year.

The Louisville-based parent of Jack Daniel's Tennessee Whiskey, and Woodford Reserve and Old Forester bourbons, reported fourth-quarter and year-end results Wednesday before the Wall Street markets opened.

For the fourth quarter, Brown-Forman reported net sales of $947 million, up 6 percent. Quarterly profits also were up 6 percent to $140 million; diluted earnings per share were up 8 percent to $0.66, compared with $0.62 in the same period last year.

For the full year, which ended April 30, profits were up 4 percent, to $684 million; earnings per diluted share were up 5 percent, to $3.21, compared with $3.06 for fiscal 2014.

The earnings were largely in line with Wall Street expectations. In a conference call with market analysts, executives said they expected the growth to continue. For fiscal 2016, Brown-Forman forecast diluted earnings per share of $3.40 to $3.60. And the company forecast 6 percent to 7 percent growth in underlying net sales, driven by the Jack Daniel's family, including Tennessee Fire, Woodford Reserve, Old Forester and Casa Herradura tequila.

"Fiscal 2015 was another superb year of comprehensive progress for Brown-Forman," CEO Paul Varga said in the news release. "Foreign exchange impact aside, our business performed exceptionally well."

Sales of Brown-Forman's flagship Jack Daniel's family grew 5 percent in 2015, with Jack Daniel's Tennessee Honey growing at 27 percent.

"We couldn't be more pleased with the enduring success of Jack Daniel's Tennessee Honey, as it begins its fifth year on the market," said Jane Morreau, chief financial officer of Brown-Forman. "It's really helped invigorate the entire trademark. ... We expect Jack Daniel's Tennessee Fire to be equally adept at expanding our consumer base. (Tennessee Fire) began nationwide rollout in the fourth quarter, and trade and consumer reaction was even better than seen with Tennessee Honey."

Morreau said Fire is tracking about 130 percent of Tennessee Honey's sales at the same point of rollout.

Brown-Forman said Tennessee Honey, the sweet extension of its top brand, is now thought to be the 15th-largest brand in the world priced higher at more than $25 for a 750ml bottle.

With the cinnamon-flavored variant, Brown-Forman is continuing cautious growth, Varga said. So far there has been only limited overseas testing; Tennessee Honey took four years to roll out globally, Varga said, hinting that Fire is probably on a similar schedule.

Overall Brown-Forman sales in the U.S., which is 43 percent of Brown-Forman's total market, were up 10 percent, with Jack Daniel's Tennessee Whiskey nearing 5 million cases in annual U.S. sales.

Woodford Reserve, which is made in Kentucky, saw exceptional growth, the company said, with gains of 33 percent for the family of brands.

Likewise, Old Forester, Brown-Forman's founding brand, saw a 38 percent surge in sales, the company said, with the launches of Old Forester 1870.

"Old Forester, in some ways, became so small it became cool and relevant again," Varga said. "It had been chugging along at the 100,000-case mark for a couple of years. But it has met its time. ... There's certainly some retro appeal to it."

Last week, Brown-Forman closed on the purchase of Main Street properties to build a $45 million Old Forester Urban Distillery and visitors center to capitalize on the interest in bourbon.

And late Tuesday, the company announced a $50 million investment in Irish whiskey. Brown-Forman plans to build a distillery on the grounds of Slane Castle, north of Dublin.

Construction is scheduled to begin this summer on a distillery that will enable the company to produce "in excess of half a million nine-liter cases," Varga said. "Woodford Reserve is not that large now, and we've been at that for 20 years. We would be enabling a generation of development."

The unnamed Irish whiskey will go on sale in 2017, using purchased bulk whiskey blended to suit; Brown-Forman's own whiskey won't be ready until 2022.

But the appeal of the market is that Irish whiskey is high quality, with very few competitors, and it is at the early stages of global interest, giving the company another label for its broad-based whiskey portfolio, Varga said.

The portfolio of premium whiskey brands, which includes the Woodford Reserve family, Jack Daniel's Single Barrel, Gentleman Jack, Sinatra Select, No. 27 Gold and Collingwood, surpassed 1 million cases in sales, with 15 percent sales growth, the company said.

Tequila also performed well: The company's Casa Herradura brands had 8 percent growth in sales globally, driven in part by bar sales for the World Cup.

Not every brand showed gains in 2015: Finlandia vodka suffered a 5 percent decline in underlying net sales; Brown-Forman blamed a tax increase last year in Poland, the brand's largest market, for driving down sales.

And Southern Comfort's family saw a 5 percent decline in underlying net sales inside and outside the United States.

Brown-Forman said the decline is due to pressure from the growth of the flavored-whiskey category.

"Our entry into flavored whiskey was a bit defensive, to protect Jack Daniel's and Southern Comfort," Varga said. "And Tennessee Honey emerged out of that. Southern Comfort has been shored up, and I do feel like it would be deteriorating more if we hadn't done what we have."

Brown-Forman has invested in advertising campaigns, new packaging and new flavors to give the brand a lift.

"There really is a core Southern Comfort user who likes the product in the bottle and won't be distracted by other flavored whiskeys," Varga said. "It's just competitively under assault."